Australian Regulators Urge Firms to Adhere to ISDA Fallbacks Protocol
APRA announced that Australian regulators (APRA, the Australian Securities and Investments Commission, and the Reserve Bank of Australia) strongly urge Australian institutions to adhere to the ISDA Protocol and Supplement. ISDA has announced that it will launch the 2020 IBOR Fallbacks Protocol and an associated Supplement to the 2006 ISDA Definitions on October 23, 2020. All financial and corporate institutions that use derivatives contracts referencing London Inter-bank Offered Rate (LIBOR) are strongly encouraged to review and adhere to the protocol by its effective date of January 25, 2021.
While the regulators welcome the progress of LIBOR transition in Australia to date, continued focus and effort are necessary, as highlighted in the APRA communication. Adherence is an important step toward the orderly transition of LIBOR-referenced derivatives contracts. It is critical to the mitigation of both individual entity risks and systemic risks associated with the discontinuation of LIBOR. The 2020 IBOR Fallbacks Protocol and associated Supplement to the 2006 ISDA Definitions are needed to implement robust fallback provisions for derivative contracts referencing key IBORs, including the London Interbank Offered Rate (LIBOR). The protocol and supplement are informed by extensive consultation with industry, including in Australia. FSB has also released a statement encouraging broad and timely adherence to the protocol. Industry-wide adoption of the fallbacks protocol is expected to significantly reduce the risks of contractual disputes, litigation, and frustration by creating a consistent approach to fallback rates when LIBOR comes to an end.
Related Links
Keywords: International, Asia Pacific, Australia, Banking, Securities, LIBOR, IBOR, Derivatives, Benchmark Reforms, Benchmark Fallbacks, ISDA, APRA
Previous Article
PRA Updates Supervisory Statement on Counterparty Credit RiskRelated Articles
OSFI Discusses Benchmark Rate Transition, Sets Out Work Priorities
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
EBA Proposes Standards to Support Secondary NPL Markets
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
EBA Issues Standards for Crowdfunding Service Providers Under ECSPR
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.
EU Confirms Agreement on Rules on Cybersecurity and Banking Resolution
The European Securities and Markets Authority (ESMA) published a paper that examines the systemic risk posed by increasing use of cloud services, along with the potential policy options to mitigate this risk.
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
SNB Updates NSFR Forms and FINMA Consults on Operational Risk Circular
The Swiss National Bank (SNB) published Version 1.2 of the reporting forms (NSFR_G and NSFR_P) on the net stable funding ratio (NSFR) of banks, along with the associated documentation.
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
